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Gains from Others’ Losses: Technology Trajectories and the Global Division of Firms

This paper offers new insights into the role of firms versus individuals in driving technology directions, and the extent to which human capital may be lost during industrial shifts. We explore in particular whether (1) due to different offshore production economics, firms who move manufacturing offshore slow U.S.-based R&D activities in an emerging technology and (2) the inventors originally within these offshoring firms, leave, and continue innovating in the emerging technology at different institutions. We focus on the 28 leading U.S. optoelectronic component manufactures for telecommunications and the inventors who patent at these firms. We triangulate hand-classified USPTO patents, SEC filings, inventor resumes, survey data, and select interviews of key inventors. We find that, in the case of U.S. optoelectronic component manufacturers for telecommunications, offshoring is associated with a decrease in innovation in the emerging technology, but an increase in all other types of patenting. While the majority of inventors depart to firms outside the industry and stop work in the emerging technology, an important minority of emerging technology inventors at the offshoring firms depart to a single onshore firm in the same industry (which gains from others’ losses and subsequently dominates this space). Our results suggest a strong role for firms and firm strategy in driving innovation directions, and the corresponding opportunities faced by individuals.